The Hindu Business Line : Imperial deal will not be affected by dip in crude prices, says ONGC chief

New Delhi, Oct. 17 The recent softening of global crude oil prices is unlikely to affect public sector exploration and production major ONGC’s plans to acquire London Stock Exchange-listed Imperial Energy Corp.

This was stated by the Chairman and Managing Director of ONGC, Mr R. S. Sharma, at the sidelines of the 11th Energy Summit on ‘Indian Oil & Gas Sector’ organised by Assocham, here on Friday.

ONGC, through its overseas investment arm ONGC Videsh Ltd (OVL), has bid to acquire Imperial Energy in a $2.59 billion deal. “We do not foresee revision in the bid because of fall in oil prices,” he told media persons.

This deal is dependent on clearance from Russia as Imperial owns assets in the Tomsk region of western Siberia. The ONGC chief is expected to accompany the Petroleum Minister, Mr Murli Deora, on his Russia visit later this month where the deal will be discussed.

On trend of global crude prices, Mr Sharma said, “we have a long-term view and still believe crude oil prices will bounce back once the global economy stabilises. Fundamentals say the days of cheap oil prices are gone.”

Asked whether the current global financial crisis is likely to impact ONGC’s overseas acquisition plans, he said, “we think this is the right time to buy oil and gas assets. We have enough liquidity for overseas transactions. At any given point we are looking at 6-10 opportunities.”

He said ONGC’s gross realisation on crude oil sales in second quarter of current fiscal was about $ 115 a barrel. “We have natural hedge against decline in crude oil prices. When in the first quarter our gross billing was $145 a barrel, we had also to pay $56 a barrel towards subsidising fuel. As prices come down, our subsidy burden will also come down which is a good thing,” he said.

Besides, the currency (rupee) depreciation was also a good sign for the company as ONGC bills its customers in dollars. For the second quarter, he said, the company was yet to be told how much subsidy it has to bear. “Our budget for capital and operation expenditure was made at $ 52 a barrel,” he said.

Earlier, addressing the conference, Member (Energy), Planning Commission, Dr Kirit S Parikh, sought inclusion of many more tax incentives in New Exploration and Licensing Policy (NELP) to persuade investors to stay in India. He also sort more powers for oil regulator for deciding fair refining and retail petroleum pricing and removal of monopolistic tendencies in domestic oil sector for justified competition.

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